The Feathered Friends' Board of Birds (consisting of the Madame Chairbird, a sparrow, a turkey, a puffin, a robin, and an owl), an organization whose purpose is "to place stray birds with nice bird families," discusses the case of Big Bird. The group's social worker Miss Finch (performed by Cheryl Wagner and voiced by Sally Kellerman) is sent to Sesame Street, New York City, to find Big Bird and bring him to a worthy family of dodos in Oceanview, Illinois. However, Big Bird begins to feel distressed in living with the dodos when they insist on calling him "Big Dodo", and the dodos all think very poorly of non-birds, suggesting Big Bird should have a bird as a best friend instead of Mr. Snuffleupagus (who is currently watching over Big Bird's nest), which proves to be the last straw for Big Bird.

When Big Bird eventually runs away from his new home to head back to Sesame Street, he ends up on the news, Miss Finch tells reporter Kermit the Frog that she intends to reclaim him. His friends on Sesame Street also see the news and band together to find him before Miss Finch does. Gordon, Olivia, Linda, and Cookie Monster set out in a Volkswagen Beetle. Count von Count departs in his Countmobile. Ernie and Bert go out to search in an airplane. Grover flies as Super Grover (later falling into the Volkswagen). Maria rides with Oscar the Grouch, Telly Monster, and Homer Honker in Oscar's Sloppy Jalopy. Bob instructs all of them to head to Toadstool, Indiana where they should meet up with Big Bird.

Big Bird has numerous adventures in his attempt to get home. First, he hitches a ride with a turkey truck driver (Waylon Jennings) who encourages him not to give up trying to get to his goal. He then meets two kids named Ruthie and Floyd (Alyson Court and Benjamin Barrett) at a farm and stays with them for a while. He comes to a stop because of Miss Finch's arrival, and Ruthie and Floyd tell him to hide in their hay field.

After leaving the farm, Big Bird comes across a cornfield and is spotted by Ernie and Bert in their plane. Big Bird, however, is unaware that they are in it and thinks it's Miss Finch. When Ernie steers it towards Big Bird, he flees in fright. Ernie turns it upside down to get his attention and begins singing "Upside Down World" with Bert beginning to join in singing, but when they turn it back up Big Bird is gone and Ernie blames it on Bert.

Big Bird is also sought by two unscrupulous scam artist brothers known as the Sleaze Brothers, consisting of feeble-minded Sid (Joe Flaherty) and crafty Sam (Dave Thomas), who operate a fraudulent carnival called The Sleaze Brothers Funfair. They want to capture him to put him on display. Eventually Big Bird arrives in Toadstool. Shortly after arriving, Miss Finch finds him there and gives chase through the city. On the outskirts, the Sleaze Brothers have set up their carnival and Big Bird shows up asking if they have a place to hide him from Miss Finch. They then put him in their "hiding cage." Shortly afterwards, they decide to paint him blue and tout him as "The Bluebird of Happiness." However, his performance is one of sadness as he sings a song about wishing to be back home with his friends. Despite this, he brings in a lot of customers as Sam is seen backstage during the performance happily counting their piles of cash.

After the show, two kids sneak backstage to see him. Upon noticing them, Big Bird asks them to call Sesame Street to tell his friends where he is. They do so and the next day, his friends sneak into the circus tent to try to free him. However, the Sleaze Brothers quietly wake up. Just as Linda unlocks Big Bird's cage, the Sleaze Brothers drive off in their truck with the cage (and Big Bird still in it) in tow. Gordon and Olivia give chase in the Volkswagen and succeed in rescuing Big Bird, after telling him to jump from the moving truck. Shortly afterwards due to speeding, the Sleaze Brothers are pulled over by a police officer (John Candy) and his kid sidekick (whose apple was stolen at the Sleaze Brothers' carnival earlier in the film) and arrested on charges of counterfeiting, extortion, fraud, impersonating a dentist, and apple theft.

Back on Sesame Street, Big Bird is happy to be back home and looks on as Miss Finch arrives. Miss Finch admits to Big Bird that the Dodos were not perfect for him but says she has found him another bird family. Maria convinces her that he can be, and is, happy there on Sesame Street where that it does not make any difference that his family consists of humans, monsters, cows, Grouches, Honkers, and the other varieties of eclectic species there. What matters is that they are family. After considering what she has heard and realizing how far his friends went to try to bring him back, Miss Finch declares that Sesame Street is his home and leaves satisfied. Big Bird is then reunited with Snuffy. Gordon, Olivia, Linda, and Grover bring the Volkswagen (which was mostly eaten by Cookie Monster) to Susan, Maria, Bob, and Luis to see if they can fix it. At the end of the film, Oscar is carried around the block in his trash can by Bruno the Trashman in order to get over everyone's happiness.

At the beginning of the end credits, the Count begins to count the movie credits (in a nod to the television series, he calls the co-creator of Sesame StreetJoan Ganz Cooney "mom" when her name is credited as one of the executive producers). By the end of the credits in a brief "bonus scene," the Count announces 278 credits and does his trademark laugh accompanied by a thunderclap.

Sesame Street Presents Follow That Bird was filmed on location in Ontario, Canada (Bolton, Schomberg and Georgetown), and at Toronto International Studios in 1984. The street set was built to look more realistic than the television series. The expanded street set includes a music store, a fire station, an auto body shop, a family clinic, a bakery, a bookstore and a grocery store. Early on, the Sesame Street people noticed that Oscar's trash can on the set was too new and clean looking, so the crew had to bang it up to make it dirty. According to Noel MacNeal, after filming the footage of Big Bird on the farm with the kids, the filmmakers discovered that the film was badly scratched and unusable. The actors, crew and performers had to return to the same location, but it was months later, and it happened to be winter. Many of the green leaves the audience sees are spray-painted, and after each take, the kids would run to put their coats on. Also: while filming Bert and Ernie's "upside-down world" song, Jim Henson and Frank Oz were actually in an upside-down biplane eighteen feet from the ground. After filming wrapped, the filmmakers didn't believe the voice of Cheryl Wagner, who had performed Miss Finch while voicing her simultaneously, seemed appropriate for the character, so her voice was dubbed over by that of Sally Kellerman. Due to the film needing to mainly focus on Big Bird, and Elmo being a minor character at the time of the film, the filmmakers decided to exclude him from the majority of the film and only have him make a very brief non-speaking cameo appearance at the very end of the film.

The film was first released on VHS and LaserDisc in 1986. The film would get re-released onto VHS three times by Warner Bros. Family Entertainment starting in 1993, then a second time in 1999, and then again in 2002. A DVD release followed in 2004, which was later re-issued as a special "25th Anniversary Edition" in 2009, with the original theatrical widescreen version and the new bonus features and cover art.[5]